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6662 is not applicable to any portion of an underpayment to the
extent that an individual has reasonable cause for that portion
and acts in good faith with respect thereto. See sec.
6664(c)(1). Such a determination is made by taking into account
all facts and circumstances, including whether the taxpayer
relied reasonably on a professional tax adviser. See sec.
1.6664-4(b)(1), Income Tax Regs.
Larry and John seek relief from the penalty by arguing they
relied reasonably on advice from Kaplan. Reasonable reliance on
the advice of counsel or a qualified accountant can, in certain
circumstances, be a defense to the accuracy-related penalty for
negligence. See, e.g., Ewing v. Commissioner, 91 T.C. 396, 423-
424 (1988), affd. without published opinion 940 F.2d 1534 (9th
Cir. 1991); Jackson v. Commissioner, 86 T.C. 492, 539-540 (1986),
affd. 864 F.2d 1521 (10th Cir. 1989); Pessin v. Commissioner, 59
T.C. 473, 489 (1972); Conlorez Corp. v. Commissioner, 51 T.C.
467, 475 (1968). In those cases, the taxpayer must establish:
(1) The adviser had sufficient expertise to justify reliance, (2)
the taxpayer provided necessary and accurate information to the
adviser, and (3) the taxpayer actually relied in good faith on
the adviser’s judgment. See Ellwest Stereo Theatres v.
Commissioner, T.C. Memo. 1995-610.
In the instant case, Larry and John have used the accounting
services of Kaplan for over 10 years and have always relied on
Kaplan with respect to tax matters. Kaplan prepared all returns
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